As a member of your homeowners association Board of Directors, you know how important it is to protect your community’s funds. There are practices that can help your Board safeguard your accounts. Several of the practices described below rely on the bank’s cooperation. If your bank doesn’t offer or enforce some of these services, investigate procedures at other
1. Know the association’s federal tax identification number (FTI). Make sure all bank accounts are under the association’s name and FTI number. All Board members should know the FTI number so someone else can manage an account if the treasurer is not available. However, the number should not be given to the general community.
2. Require dual signatures for all withdrawals. Require dual signatures on all checks and a monthly report showing check numbers, payees, and amounts. In addition, request canceled checks or the electronic image along with monthly statements from the bank.
3. Separate and safeguard your association’s reserves. As your association builds its reserve funds, keep these in a separate account. At least two Board members should manage your reserve account.
4. Request duplicate monthly statements of operating and reserve accounts. Your management company (or treasurer if your HOA is self-managed) should receive one statement. A duplicate statement should be sent to a Board member who does not have withdrawal/transfer authority for the account.
5. Change passwords when Board members change. Whether all Board members or just one or two have access to your financial accounts, it’s a good practice to change the passwords when there’s a change on the Board. This small inconvenience could prevent someone from falsifying bank statements.
6. Reconcile invoices and receipts with checks. If the association has professional management or a bookkeeper, the board treasurer should conduct this review. If self-managed, a board member without access to the bank accounts or credit card privileges should check for any unauthorized use.
7. Hire an independent Certified Public Accountant to conduct an audit or review. While it may be too costly to conduct an audit every year, the board should have one performed every few years. In the interim, verify bank balances in an annual review.
While there are no fail-proof practices, these safeguards can help to create a system of checks and balances to keep your association from becoming a victim of fraud or embezzlement.
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Wise Property Solutions is East Tennessee’s only Accredited Association Management Company (AAMC®). As the region’s leader in community association management, the firm is committed to the industry’s best practices and continuing professional development. Wise Property Solutions’ certified and highly trained property managers empower well-organized and efficient communities. The firm maintains offices in both Knoxville and the Tri-Cities.